Congressional Democrats are already moving ahead with plans to consider broad changes to federal marijuana laws in 2019.
Whereas the Republican-controlled House for the past several years had blocked votes on most cannabis-related measures, the chamber’s new Democratic majority on Wednesday announced it has scheduled a hearing for next week to examine the difficulties that marijuana businesses face in opening and maintaining bank accounts.
Titled, “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses,” the hearing will take place on February 13 before a subcommittee of the House Financial Services Committee.
Although a growing number of states are moving to legalize marijuana for medical or recreational use, cannabis remains federally prohibited. As a result, and despite a 2014 guidance memo released on the topic by the Obama administration aimed at clearing up the issue, many financial services providers remain reluctant to work with the industry out of fear of violating money laundering or drug laws.
“When we introduced this bill six years ago, we warned that forcing these businesses to deal in cash was threatening public safety. No hearing was given,” Rep. Denny Heck (D-WA) said in an email, referring to marijuana banking legislation he and Rep. Ed Perlmutter (D-CO) have filed for the past several Congresses.
He lamented that Republican leadership didn’t schedule a hearing on the proposal even after a security guard at a Colorado dispensary was killed during a robbery.
“Chairwoman Waters has made it one of her first priorities to address this urgent and overdue issue, demonstrating that she understands the threat to public safety and the need for Congress to act,” Heck said of the committee’s new leader. “We have a bipartisan proposal to allow well-regulated marijuana businesses to handle their money in a way that is safe and effective for law enforcement to track. I am eager to get to the work of refining it and passing it into law.”
That a hearing on the issue was in the works was first noted earlier this week by Politico, and Marijuana Moment reported that the full committee is also actively planning to vote on a marijuana banking bill in the coming months.
The newly scheduled marijuana hearing is a signal that Democrats intend to move cannabis legislation this year, and is likely to be the first in a series of committee-level actions across the House on the issue.
“The upcoming hearing presents a real opportunity for the Democratic Party to assert their leadership by finally beginning the conversation on how we end the failed policy of marijuana criminalization,” Justin Strekal, political director for NORML, said.
While two limited medical cannabis research bills were able to advance out of House committees last year, they never made it to the floor for votes. Meanwhile, Republican leaders consistently prevented members from offering marijuana-related amendments—including ones on banking issues—to larger legislation.
In contrast, Rep. Earl Blumenauer (D-OR) suggested in a memo to party leaders late last year that they pursue a step-by-step approach to legalize marijuana in 2019. His plan recommends that Financial Services and other committees first begin holding hearings on incremental reforms like banking access, research expansion and medical cannabis for military veterans before passing bills on those issues as part of a lead up to ultimately approving broader legislation to formally end federal marijuana prohibition by the end of the year.
A House bill to protect banks from being punished for working with state-legal marijuana businesses that Heck and Perlmutter introduced garnered 95 cosponsors in the last Congress, and 20 senators signed onto a companion bill, but neither were given hearings or brought up for votes.
“Depriving state-legal cannabis businesses of basic banking services and forcing them to operate entirely in cash presents a significant safety risk, not just to those businesses and their employees, but to the public,” Don Murphy, director of federal policies for the Marijuana Policy Project, said in an email. “Support for addressing the cannabis banking problem is strong and bipartisan, and it appears Congress may be ready to adopt a real, commonsense solution. Members concerned about public safety should be jumping at the chance to express their support for this legislation.”
Congress has held only a handful of hearings on marijuana reform issues in recent years, and never before has any come at a time when broad cannabis reform legislation seemed to be conceivably on its way to passage.
“This hearing is historic for cannabis policy reform advocates, business owners and the banking sector, and could directly lead to the first in what is hopefully a series of positive changes in the 2019 legislative cycle,” Morgan Fox, media relations director for the National Cannabis Industry Association, said in an email. “Allowing banks to work with cannabis businesses more easily will benefit public safety, increase transparency, provide more financing options for small businesses and communities that have been targeted by prohibition, and help companies thrive so they can further displace the illicit market.”
Outside of the two committee markups of cannabis research legislation last year, which were not preceded by formal hearings on the relevant issues, Senate panels have on a few occasions held lengthy discussions on marijuana.
In 2013, for example, the Senate Judiciary Committee convened a hearing to dig into the fact that a growing number of states were legalizing marijuana in contrast with federal law.
The Senate Caucus on International Narcotics Control, which is not a formal standing committee of the body, hosted a discussion on federal marijuana enforcement in 2016. Its two cochairs, Sens. Charles Grassley (R-IA) and Dianne Feinstein (D-CA), have long been among Congress’s most vocal opponents of cannabis reform, though Feinstein began to shift her position last year.
Also in 2016, the Senate Judiciary Committee’s Subcommittee on Crime and Terrorism held a hearing on the risks and potential benefits of medical cannabis, but it did not lead to votes on any marijuana legislation.
Meanwhile, pressure to address cannabis banking has been growing. Several top Trump administration officials have indicated they support clarifying the issue.
Treasury Secretary Steven Mnuchin, for example, suggested in testimony before a House committee early last year that he supports letting marijuana businesses store their profits in banks.
“I assure you that we don’t want bags of cash,” he said. “We do want to find a solution to make sure that businesses that have large access to cash have a way to get them into a depository institution for it to be safe.”
In a separate hearing Mnuchin revealed that addressing the issue is at the “top of the list” of his concerns.
Federal Reserve Chairman Jerome Powell said that the growing gap between state and federal marijuana laws “puts federally chartered banks in a very difficult situation… It would great if that could be clarified.”
And last month, Comptroller of the Currency Joseph Otting called on Congress to “act at the national level to legalize marijuana if they want those entities involved in that business to utilize the U.S. banking system.”
Meanwhile, although many major financial institutions are staying away from the cannabis industry, federal data does show that an inceasing number of banks are beginning to work with marijuana growers, sellers, processors and related businesses.
It hasn’t yet been announced who will be testifying at next week’s cannabis banking hearing before the Consumer Protection and Financial Institutions Subcommittee.
Square Quietly Launches Program For CBD Cannabis Company Credit Card Processing
Companies that sell cannabis products—even those consisting of CBD derived from hemp, which was legalized in the U.S. through the Farm Bill late last year—are continuing to have trouble accessing basic financial services that are available to businesses in other sectors. That includes being able to maintain bank accounts and process their customers’ credit cards.
The latter problem could be solved under a new pilot program that has quietly been launched by the payment processing service Square.
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
Facebook Uses Marijuana And Broccoli To Show Off Its AI Tech
Marijuana buds and tempura broccoli can look oddly similar out of context, but Facebook’s artificial intelligence (AI) technology can tell the difference.
At its annual developers conference on Wednesday, Facebook CTO Mike Schroepfer discussed how the social media giant is able to leverage visual AI to spot “policy-violating content,” including advertisements to sell cannabis on the platform. He explained the process by comparing images of the fried vegetable next to marijuana buds, which he described as the “most benign possible example” of prohibited content he could find.
— Queenie Wong (@QWongSJ) May 1, 2019
Five years ago, the company relied on “behavioral signals” to catch people advertising cannabis—things like whether the advertiser has been “caught for doing bad stuff before” or whether they used “obvious words” like “marijuana” or “drugs” in the post. But as AI advanced, Facebook developed a system that could visually distinguish cannabis from other miscellaneous items.
To drive the point home, Schroepfer put both images on the screen and challenged the audience to differentiate them.
— Tom Simonite (@tsimonite) May 1, 2019
A few people thought the tempura broccoli was marijuana, but most seemed to get it right. The visual algorithm was 94 percent sure that the marijuana was, in fact, marijuana, and 88 percent sure that the other image was the broccoli.
— john colucci (@johncolucci) May 1, 2019
For Facebook, the technology offers a convenient way to streamline its policy enforcement efforts. But for many cannabis reform groups and media companies that run Facebook accounts, the presentation is a window into an ongoing frustration.
The ban on content promoting the sale of federally illicit drugs has had collateral consequences for pages that post noncommercial marijuana material such as news outlets like Marijuana Moment and state regulatory bodies like the Massachusetts Cannabis Control Commission. These pages have at times been hidden from search results (a technique referred to as “shadowbanning”) because the algorithm isn’t able to accurately differentiate commercial advertisements from cannabis-related news articles, for example.
Marijuana influencers and state-legal cannabis businesses have long complained about having their accounts on the Facebook-owned Instagram platform temporarily disabled or permanently blocked for depicting cannabis or advertising their services.
A policy change may be on the horizon, as the company said in March that it wants “to consider whether we can loosen this restriction, especially in relation to medical marijuana, legal marijuana and brick and mortar stores.” But for the time being, Facebook will continue to enforce the policy, and it hasn’t provided a status update on that front at the conference so far.
“It’s against our policies because it’s against U.S. federal law, so you can’t advertise marijuana on Facebook,” Schroepfer said.
Photo courtesy of Facebook.
FDA Sends Warnings To Three Companies Selling CBD Products
At the same time that the Food and Drug Administration (FDA) is working to create a regulatory framework for hemp-derived CBD, it’s also cracking down on companies that are in its view irresponsibly marketing CBD products and making unsanctioned claims about their medical benefits.
FDA announced on Tuesday that it and the Federal Trade Commission sent warning letters to three such companies last month: PotNetwork Holdings in Florida, Nutra Pure in Washington state and Advanced Spine and Pain in New Jersey. The letters were sent “in response to their making unsubstantiated claims related to more than a dozen different products and spanning multiple product webpages, online stores and social media websites,” FDA Commissioner Scott Gottlieb said in a press release.
In a Twitter thread, the commissioner added that he was “concerned to hear recently that several national pharmacy chains and other major retailers have begun to sell or will soon begin to sell” CBD products and that the agency will “be contacting them to remind them of #FDA obligations and our commitment to protect consumers against products that can put them at risk.”
CVS and Walgreens both recently announced they will begin selling CBD-infused products.
We’ll be contacting them to remind them of #FDA obligations and our commitment to protect consumers against products that can put them at risk.
— Scott Gottlieb, M.D. (@SGottliebFDA) April 2, 2019
In the press release about the warning letters his agency has already sent to CBD companies, Gottlieb asserted that they used their websites to “make unfounded, egregious claims about their products’ ability to limit, treat or cure cancer, neurodegenerative conditions, autoimmune diseases, opioid use disorder, and other serious diseases, without sufficient evidence and the legally required FDA approval.”
At the same time, the warning letters announced today make clear that #FDA has and will continue to monitor the marketplace and use our authorities to take action against companies illegally selling these types of products when they are putting consumers at risk
— Scott Gottlieb, M.D. (@SGottliebFDA) April 2, 2019
FDA is hustling to provide manufacturers guidelines on marketing cannabidiol following the federal legalization of hemp last last year, but the process is complicated by the fact that CBD is the active ingredient in an FDA-approved drug, Epidiolex, and remains the subject of intensive clinical testing. Gottlieb has indicated that it will take years to develop a regulatory plan for CBD without further congressional action.
In the meantime, companies that continue to choose to engage in CBD commerce should be wary about making health claims about their products. The commissioner said FDA has “limited resources” for enforcement operations, but it would take action against companies that make “over-the-line” statements.
In the press announcement, FDA listed some of the unauthorized claims that the three companies made. For example, the products were touted as being able to treat cervical cancer, Alzheimer’s disease and substance use disorder.
“I believe these are egregious, over-the-line claims and we won’t tolerate this kind of deceptive marketing to vulnerable patients,” Gottlieb said. “The FDA continues to be concerned about the proliferation of egregious medical claims being made about products asserting to contain CBD that haven’t been approved by the FDA, such as the products and companies receiving warning letters today.”
“Selling unapproved products with unsubstantiated therapeutic claims can put patients and consumers at risk,” he said. “These products have not been shown to be safe or effective, and deceptive marketing of unproven treatments may keep some patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.”
Questions about what constitutes an unauthorized claim that would put a company at risk of enforcement action will likely come up at the agency’s just-announced public hearing CBD issues on May 31. Stakeholders are invited to submit information about the public safety impacts of CBD and how to manufacture and market products that contain the cannabis compound.
This piece was updated to include Gottlieb’s tweets about national pharmacy chains.
Photo courtesy of Nicholas C. Morton.